US: Former Top Enron Accountant Pleads Guilty to Fraud

Published by

The New York Times

| By

Simon Romero and Vikas Bajas

|

Wednesday, December 28, 2005

The former chief accounting officer of Enron pleaded guilty today to a single felony charge of securities fraud and agreed to cooperate with federal prosecutors, giving a significant lift to the government's case against the two leading figures in the scandal over Enron's collapse.

In exchange for his help in prosecuting the former chief executives Kenneth L. Lay and Jeffrey K. Skilling, the accounting officer, Richard A. Causey, 45, will face a sentence of seven years that could be reduced by a maximum up to two years depending on his cooperation at trial. He also agreed to pay a $1.25 million fine.

After Mr. Causey entered his plea, Judge Sim Lake of Federal District Court accepted a motion by defense lawyers to delay the start of the trial of Mr. Lay and Mr. Skilling to Jan. 30. Mr. Causey was to have gone on trial with them on Jan. 17.

The deal that Mr. Causey and his lawyer, Reid H. Weingarten, reached with prosecutors is more generous than the agreement prosecutors reached with Andrew S. Fastow, the former Enron chief financial officer who faces 10 years in prison after agreeing to plead guilty.

"Typically, the deals get worse over time, not better," said Robert A. Mintz, a former prosecutor who is now with McCarter & English, "and the fact that the government is still willing to strike a fairly reasonable plea deal is a sign that there is no limit to the number of insiders they are willing to sign on board to ensure a conviction."

In Mr. Causey, prosecutors get access to another top former Enron executive who was involved in discussions where numerous off-balance sheet transactions and creative accounting entries that led to the company's downfall were devised, approved and executed. For instance, Mr. Causey was one of two participants in a Oct. 21, 2001, meeting with Mr. Lay that is the basis of one of the seven charges against the former chief executive and chairman.

Enron declared bankruptcy in 2001 and it became clear soon after that the company had abused and misused accounting rules to make up for an array of poor business decisions.

"There is no question that Causey will bring to the prosecution evidence that Fastow could not," Mr. Mintz said.

For Mr. Causey, who had previously plead not guilty to more than 30 counts of fraud, conspiracy, insider trading and other charges, the deal guarantees him a much shorter stay in federal prison than he would have faced had he been convicted at trial. It also offers the possibility of an even shorter sentence if he performs ably as a witness against his former bosses. He will be the 16th person with ties to the company who has so far admitted in court to committing crimes.

Though on the whole very damaging for Mr. Skilling and Mr. Lay, Mr. Causey's plea deal could also form the basis of a renewed appeal by their lawyers for a change of venue.

Judge Lake has previously rejected the idea of moving the trial away from Houston, or for further delays. But legal experts say the defense will have fresh grounds to ask for a change because the hundreds of people in the Houston area who have been notified that they could be called as jurors will be subject to renewed publicity about Mr. Causey and the case.

"It provides a reasonable basis to renew that motion and they may well do it," said Daniel R. Alonso, a former federal prosecutor who has followed the case but is not involved in it.

The defense will also seek to limit the damage that Mr. Causey can inflict as a witness for the prosecution by arguing that portions of his testimony are derived from the knowledge he obtained as a joint defendant and thus should not be allowed.

"The government is going to have to tread carefully through the minefield here in trying to extract useful and admissible evidence from Mr. Causey." Mr. Mintz said.

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